Globalization for Sale

77 Pages Posted: 24 Apr 2020

See all articles by Michael Blanga-Gubbay

Michael Blanga-Gubbay

Université Libre de Bruxelles (ULB)

Paola Conconi

Centre for Economic Policy Research (CEPR); Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Mathieu Parenti

Catholic University of Louvain (UCL)

Multiple version iconThere are 3 versions of this paper

Date Written: 2020

Abstract

We study the role of firms in the political economy of trade agreements. Using detailed information from lobbying reports filed under the Lobbying Disclosure Act, we find that virtually all firms that lobby on free trade agreements (FTAs) support their ratification. Moreover, relative to non-lobbying firms, lobbying firms are larger, and more likely to be engaged in international trade and to operate in comparative advantage sectors. To rationalize these findings, we develop a model in which heterogeneous firms decide whether to lobby and how much to spend in favor or against a proposed FTA. We show that the distributional effects are asymmetric: the winners from the FTA have higher stakes in the agreement than the losers, which explains why only pro-FTA firms select into lobbying. The model also delivers predictions on the intensive margin of lobbying. In line with these predictions, we find that firms spend more supporting agreements that generate larger potential gains - in terms of the extent of the reduction of tariffs on their final goods and intermediate inputs, the depth of the agreement, and the export and sourcing potential of the FTA partners - and when politicians are less likely to be in favor of ratification.

Keywords: trade agreements, endogeneous lobbying, heterogeneous firms

JEL Classification: F130, F530, F610

Suggested Citation

Blanga-Gubbay, Michael and Conconi, Paola and Parenti, Mathieu, Globalization for Sale (2020). CESifo Working Paper No. 8239, Available at SSRN: https://ssrn.com/abstract=3584090

Michael Blanga-Gubbay (Contact Author)

Université Libre de Bruxelles (ULB) ( email )

CP 132 Av FD Roosevelt 50
Brussels, Brussels 1050
Belgium

Paola Conconi

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
32 2 650 2345 (Phone)
32 2 650 4475 (Fax)

Mathieu Parenti

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

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